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Ill. labor unions sue over plan to cut pensions

By KERRY LESTER Associated Press

Posted:
01/28/2014 12:38:27 PM EST

SPRINGFIELD, Ill.—Some of the largest public labor unions in Illinois filed a long-awaited lawsuit Tuesday challenging the state's new pension reform law, a move that could delay implementation of the landmark measure and have major ramifications in upcoming elections.

On the eve of a State of the State address by Gov. Pat Quinn, who faces a tough re-election campaign, lawyers for the We Are One Illinois coalition of unions filed the lawsuit in Sangamon County Circuit Court on behalf of two dozen retired employees.

The lawsuit, which follows others already filed by retirees, argues the pension bill approved by the Legislature and Quinn signed more than a month ago violates a clause of the state constitution that says pension benefits may not be "diminished or impaired." It also asks the court to stop the law from taking effect until the case is decided.

Michael Carrigan, president of the Illinois AFL-CIO, said the suit "makes it clear that pension theft is not only unfair, it's clearly unconstitutional."

"The Legislature and governor shirked their responsibility to uphold the constitution, so we are seeking justice in court to right their wrongs," Carrigan said." Promises must be kept, and the rule of law must prevail over politics."

The 25 named plaintiffs in the suit include retired public school teachers, firefighters, prison workers, and employees of various state agencies. Quinn, state treasurer Dan Rutherford—one of four Republican bidders for governor—and comptroller Judy Baar Topinka are defendants, along with the state's retirement systems.

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Senate President John Cullerton called the legislation an important test for the courts as the Legislature will begin to focus on other pension reform in the upcoming spring session, including for the city of Chicago.

Quinn's spokeswoman Brooke Anderson said Tuesday the lawsuit came as no surprise.

The timing, however, is less than convenient for the Democratic governor. During Quinn's address Wednesday, he is expected to tout the pension overhaul aimed at eliminating a worst-in-the-nation pension shortfall as a definitive step in ending a crisis he has said he was "put on Earth" to solve. "

The crisis has created somewhat of a rift between the governor and the state's public employee unions, some of which are top campaign contributors. AFSCME, the state's largest employees union, will hold an endorsement session Saturday, where Quinn and lawmakers supportive of the pension package could see ramifications as they seek re-election bids.

"Know that the pension theft bill, matters of retirement security more broadly will weigh heavily in terms of those endorsement decisions at every level," AFSCME spokesman Anders Lindall said.

Illinois' five public-retirement systems were $100 billion short of what was needed to meet the state's obligations to workers and retirees when the Legislature passed the measure. Its supporters say the plan will reduce that unfunded liability by about more than $20 billion and fully fund the pension systems by 2044. Originally projected to save $160 billion over 30 years, governor's office last week readjusted estimates citing market changes, noting the plan will now save the state about $145 billion over the next three decades.

The plan reduces the annual cost-of-living increases for retirees and raises the retirement age for workers 45 and younger, giving some workers the option of freezing their pension and participating in a 401(k)-style contribution plan. It also puts some savings back into the pension funds and directs money from pension bond payments to the retirement systems after those bonds are paid off in 2019. Lawmakers also included two components they say were intended to improve the plan's odds of surviving a legal challenge: a 1 percent decrease in employee contributions and a funding guarantee, which allows the systems to sue the state if lawmakers don't provide Illinois' payments to the accounts.

Illinois' pension problem was the result of decades of lawmakers skipping or shorting payments to the systems which siphoned away money away from and social services. The shortfall also caused the major credit rating agencies to downgrade Illinois to the lowest credit rating of any state.

Still, lawmakers in the Democrat-controlled Legislature failed for years to come up with a deal to solve it. In November, the four legislative leaders emerged from closed-door negotiations and said they had reached an agreement. The House and Senate approved the plan the next week.

The law has already undergone legal challenges.

In early January, the Illinois State Employees Association Retirees and the Retired State Employees Association filed class-action lawsuits in Sangamon County Circuit Court. Those suits also contend the law violates a provision of the state constitution and is unfair to retirees who made required contributions to their retirement funds, while Illinois did not.